Shareholding among French households has declined since 2008, despite the improved performance of the stock market after the European sovereign debt crisis. Many theories have been put forward to explain this phenomenon, both by the media and by financial institutions.

But are these explanations correct? Should we be satisfied with explaining this decline through the fear of losses, which would continue to give cause for concern in the minds of French people regarding financial crises?

Faced with explanations based simply on feelings or supposition, Luc Arrondel and André Masson decided to undertake academic research and carry out a long-term survey among French households.

Their article allows us to grasp the differences, which may seem tenuous at first sight but are nonetheless crucial, between risk aversion and risk tolerance, changing preferences, trust in institutions, and expectations regarding performance. It also corrects some common misconceptions, such as the idea that household savings have shifted towards specific types of investment. The insights provided by the researchers prove that the ideas put forward to explain household behaviour in relation to the stock market are often simplistic, if not erroneous.

A better understanding of the causes of and reasons for the loss of interest in shares offers us a chance to curb this phenomenon. Depriving businesses of this source of financing is in fact damaging to the economy as a whole.

Here again, the study conducted by Luc Arrondel and André Masson may surprise the reader, for It reveals the shortcomings of the most commonly proposed solutions for reorienting savings towards the markets. Take, for example, the widely held view within financial circles and public institutions that improving financial education would favour shareholding.

Improved financial education would only be a palliative measure incapable, by itself, of changing the current situation. In order to alter it, we need to look for other solutions and canvass other initiatives. Rather than focussing solely on motivations characteristic of households, the financial sector would benefit from asking what its responsibility might be for the loss of interest in shares and risky investments.

The financial community is not, however, wholly responsible for this situation, and one of the conclusions of the study is that all actors should be involved, especially the public authorities, in remedying the lack of interest in share ownership on the part of individuals.

By Jean-Michel Beacco,
CEO of the Institut Louis Bachelier

Get the English Version on page 36